Modern Budgeting Dilemmas

When discussing the cost of living crisis, on this reel, a commenter posted: 

I understand people’s complaint and because they made poor choice what they were young live later will be tough.

In order the achieve the American dream here is what you do.

15 years old get a after school/ weekend job. Earn $10-$15k per year and save $8k per year.

18 years old $30k in the bank go get a degree keep working part time earning $20k per year save $10k per year while living at home until you get your teaching qualification. 

Total savings $70k with a degree. Find a partner who should have done the same. Total $140k get out and work no kids for 2 years income $8k per month save 1/2 4K per month. Total $96k saved over 2 years. Total deposit with interest earned $250k at 25 years old. 

Buy a small house for $500k 2 bedroom work for another 2years and pay off another $80k 

You are left with a $170k mortgage have kids and enjoy life. 

If you want to speed it up get a second job while you are young and have no kids and get more paid off. 

Hope this helps.

And thinking about it, it doesn't help. Instead, it hand waves away the reality that comes in between all of those time jumps, and leaves our happy couple in the exact same situation only instead of not owning a home. It's not saving for retirement that makes them irresponsible.

Let's dig in... I picked Chicago instead of Minneapolis because it has a decent public transportation system, so you don't have to own a car and a really high minimum wage, to help our responsible teens out.

Teen years 15-18 earn 10-15k (1100/mo -- 35 hrs summer, 15 hrs school year vaca time for finals and such)

Cost while at home (150-250/mo) phone, food, life (50-200/mo) public transport/uber (600/mo) car

Savings (350-750/mo) 4200-9000/yr 

High school total saved 12600-27000

So rolling up that cost to live at home we are at 200-850/month split adding school costs now.. nobody's going to be owning the car with this going on so we're going low on the cost of living and dropping that car.

Cost to become a Nurse (ADN 7000-13000 to BSN 10000-21000) all-in 4 years, 17-34k assume grants and scholarships for half divide total cost by 4 - 4250-8500/yr 

Cost to become a teacher (start at community college to save $) 31200-45000 over 4 years, 7800-11,250/yr

College years 19-22 

Assumptions Chicago again

$17.05 minimum wage avg 20 hrs/week 50 weeks/yr - 17,050/yr gross gives $14,834 after tax

Nurse tuition cost per year 6300, books, gear, etc adds 750-1300 total 7300

Teacher tuition cost per year 9000 + 500-900 books etc total 9750

Cost to live at home nurse 150*12 , teacher 50*12 -- 600-1800/yr

Savings/yr - Nurse 5734, Teacher 4484

College total saved 19376-22936

Ready to start working -- total savings with a degree 32000-50000

The teacher cost a bit more so they're at the 32k. The nurse got super lucky. She's at 50 

So they get together and they've got 85,000 in the bank. Starting salary for a nurse: $75,000 to $83,000 per year teacher: $64,470 to $69,000 per year

Modest Cost of living family of 2 with 2 earners Chicago $3,250 – $4,350/no say 4k

Our nurse is avg 79k gross over 2 yrs, our teacher 67k gross -- net for each N: 58k T: 50k annual, 108k in 50k saved, 48k living.

185k in the bank earning interest, 80 as emergency fund, 105k for first property purchase after closing costs and down payments the mortgage will be $410,000

Now you either have to go suburbs or condo to avoid that whole car situation. When you factor in either the HOA/condo fees, property tax, the maintenance, mortgage, etc, monthly cost to own instead of rent is right at $3,500 a month up from their one-bedroom apartment which was about $2,000 a month. But now they're building equity.

Both the nurse and the teacher have kept that  second job They worked all through high school and college, which gave them that 20k a year after taxes that they can put toward paying off that mortgage. So they pay it off in just 12 years. 

Now, at 35, they are ready to start thinking about having children. Except that was a two bedroom... So now they have to get a bigger house and move to the suburbs. They're hoping to have two kids so they need at least a three bedroom in a neighborhood with decent schools. Let's assume that some magic happened and they were pretty much able to swap that out and keep on going at the same housing cost and not incur a new mortgage.

Our nurse is up to $107,000 to $115,000, But if our teacher wants to earn money, he needs to go back and get a master's degree. So you need to factor that in over the last 12 years and that's going to knock some of their earning potential and their second job potential and all that. Cuz if he doesn't go get that master's degree he's not going to be able to get up to 93k a year like we'd hope at this point. So that's going to impede our ability to finish paying off that mortgage. Darn it 

But now it's time to have kids. She's going to end up taking 12 weeks unpaid leave each time. So that's going to be a problem... So we need to save up a bit more. Let's say at 38 she starts having kids and she gets one out at 38 and one out at 40 which is a miracle but they had to do IUI to pull that off because at 35, you're already a geriatric mother. You got to have pretty good genetics to be able to get pregnant at 40 without any form of assistance. Iui is much cheaper than IVF. Thank God Chicago requires fertility coverage in insurance... So it's only going to cost you 4 to $8,000 to get pregnant. Now economists calculate on average that a woman loses 13 to 20% of her total household career earnings in the first five years of a child's life, And she's the primary wage earner so that's a hit to their future as well. Now factor in those two kids that she had to knock out pretty close together cuz she's old... With one kid they were looking at child care of $1,150 to $2,400 per month, thank goodness 2-year-olds at the toddler right now for the both of the kids it's only 2,150 to $3,700 per month.

Thank God they didn't have a new mortgage but child care apparently is two mortgages worth of cost in their world now... They're taking home 200k gross, we've ignored any major life events that could have happened. We're not even considering the cost of childbirth, they covered that out of that emergency fund that they're now refilling with savings because they are still very responsible people. 

They did have to drop the extra jobs that they've had since high school once they had kids, And buy a family money van. There is that one kiddo that needs PT, which takes both some time away from the job and add significantly to their medical cost. They're after tax take home is now $12,616. 

Paid off property cost: $1,200 to $1,500 (taxes, hoa) No mortgage!

Capital reserves (new roof etc) 400/mo

Home maintenance (operational repairs and lawn) 500/mo

Ok... So breaking down our responsible kids life again:

Housing monthly $2200

Food $1,450 to $1,950 per month (breastfeeding or formula)

Utilities (phone internet gas electric trash etc) $700

Childcare $2800

Healthcare copays etc $150-300

Clothing and stuff 350/mo

Minor monthly expenses (broken appliance, birthday, etc) 300/mo

car payment/auto insurance/gas/maintenance $900

subscription services gym, Netflix etc 100/mo

Emergency fund 1000/mo

Savings for annual expenses (life insurance, and other annual bills) 1000/mo

IRA (500/mo each) 1000/mo

Total expenses $12,275

Buffer 300/mo

Unfortunately they haven't spent any money on major home repairs like new roof, siding, paint, whatever so their house is falling apart... Notice we just added that savings and expense with this last calculation. Also, They haven't saved for retirement until now either, so they're pretty screwed on that front. 

In fact, if they post about that on social media, The resulting advice will practically write itself: 

I understand people's complaint because they made poor choices when they were young, life in their retirement years will be tough. 

In order to gree achieve that retirement dream. Here is what you do: 

15 years old getting after school or weekend job. Earn 10 to 15K per year and save 8K into your Roth IRA. 18 years old. You'll have 30k in your retirement account ready to earn that 10% compound interest. 

Go get a degree. Keep working part time earn 20K per a year. Keep saving the max into your Roth IRA between 15 and 25 and find a partner that does the same and you'll both retire with between 3 and $6 million in the bank. 

Hope that helps.

Note: All of these numbers exclude the inflation that will occur over the 15 years of the timeline...

Back of the napkin inflation adjustments:

 assume:

General inflation: 2.5%/yr

Wages: +3.0%/yr

College tuition: +4.5%/yr

Housing: +3.5%/yr

Childcare: +4.0%/yr

Starting today:

Age 15 (2026)

Teen earns about $17,050/year working part-time (Chicago minimum wage, ~20 hrs/week average).

Age 19 (2030) - Start college

If tuition keeps increasing at 4.5% annually:

Teacher degree that costs about $40,000 today → about $47,700

Nursing degree that costs about $25,000 today → about $29,800

The teen's part-time income, growing only with wages, becomes about:

$19,200/year

So college has gotten 19% more expensive, while wages have only increased about 13%.

Age 23 (2034) - Graduate

Starting salaries become roughly:

Teacher: $84,900

Nurse: $100,100

That sounds great until...

Age 25 (2036) - Buy the house

Your "$500,000 starter home" is now approximately:

$705,000

So instead of needing a $250,000 down payment, they'd need roughly $350,000 just to put 50% down like the original comment suggested.

That's an extra $100,000 they have to save before they can even follow his plan.

Age 37-39 (2048) - Finally have kids

Your $2,800/month childcare bill becomes roughly:

$6,600/month

...before considering any additional inflation in healthcare or other family costs.

Sources

Financial Data Line Item / Metric Sourced Value / Fact Explanation Raw Copyable Web URL Source

Chicago Teacher Base Pay CPS Lane 1 Step 1 starting wage baseline ($64,470 - $69,000). https://www.teach.cps.edu/tab-earn-1

Chicago Teacher Contract Details Pension 'pick-up' mechanics and CTU union fee parameters. https://www.ctulocal1.org/wp-content/uploads/2024/04/EPIC-CTU-CBA-Final-with-signatures.pdf

Illinois Teacher Advancement Source for 15-credit educational lane shifting criteria. https://www.modelteaching.com/education-articles/teacher-wellness/illinois-teacher-lane-change

UIC Online Nursing Tuition Baseline program cost of $330 per credit hour ($9,990 total). https://onlinenursing.uic.edu/online-programs/rn-bsn/

Chicago Minimum Wage Rules The flat $17.05/hr part-time college income constraint. https://www.chicago.gov/city/en/depts/bacp/supp_info/minimumwageinformation.html

Chicago Public Transit Fares Exact cost data for the $75 unlimited 30-day ride pass. https://www.transitchicago.com/passes/

Suburban Home Values Market benchmarks for 2-to-3 bedroom properties ($500,000 ceiling). https://www.zillow.com

Suburban Infant & Toddler Daycare National and regional average costs for center-based infant and toddler care. https://www.childcareaware.org/demographics-and-data/

Private Physical Therapy Rates Insurance-backed contract rates and co-pay parameters. https://www.bcbsil.com

Nursing & Teaching Textbooks & Gear Average out-of-pocket costs for college books, stethoscopes, and training tools. https://www.trends.collegeboard.org

Baseline Family Budget Estimator Tools Living wage frameworks, family allocation patterns, and regional savings calculators. https://livingwage.mit.edu

General Consumer Expenditure Benchmarks Averages for domestic household costs like housing, food, and annual expenses. https://www.bls.gov/cex/

IRA Compounding Calculator https://www.fidelitybank.com/resources/knowledge-center/calculator-how-much-will-my-roth-ira-be-worth-at-retirement/